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May 21, 2009

PFGBest's Alaron Acquisition Clears Way For More Deals

By Jacob Bunge

CHICAGO (Dow Jones)--PFGBest bought the customer assets of Alaron Trading, a combination that creates the third-largest futures firm in Chicago and sets the stage for further acquisitions, according to PFGBest's president.

The deal raises PFGBest's total customer assets to $425 million and gets the company closer to its goal of $1 billion in assets by 2010, said Russ Wasendorf Jr., president of the company.

The two privately held brokerages operate similar business models, focused on providing retail traders access to futures and options markets.

Terms of the deal, completed May 14 and announced Thursday, were not disclosed.

Wasendorf said the financial crisis, which has slowed trading activity in futures markets and put brokerages under stress, will continue to create attractive acquisition opportunities in the sector.

"We are looking for more acquisition targets," Wasendorf said in an interview. "We believe this is the perfect time."

Combining the firms will let Alaron brokers offer PFGBest's range of electronic trading platforms, while PFG gains a research arm that includes high-profile energy markets expert Phil Flynn.

Steve Greenberg, founder of Alaron, will stay on to manage the company as a division of PFGBest called ATD.

PFGBest and Alaron are merging operations against a backdrop of major consolidations that have seen competitors chase increasingly larger institutional clients, but Wasendorf said the combined entity will maintain a focus on the retail segment that's been neglected by major futures brokers.

The long-term goal, Wasendorf said, is to get more of PFGBest's clients into "sustainable investing products," where assets are overseen by professional traders rather than day-traded by the retail investors themselves.

That would mean bigger fee revenue for PFGBest, while giving retail clients more stable performance than they might get trading on their own.

Adding Alaron's approximate $150 million in customer assets moves PFGBest toward a "critical mass" that will boost returns on those assets, because professional traders will be working with a bigger pool of money.

"That's why these acquisitions are extremely valuable to us," Wasendorf said. "Now that we're at that level, all we need to do is continue to add assets and profitability increases."

By Jacob Bunge, Dow Jones Newswires; (312) 750-4117;